Nicholas Spiro

The View | 5 reasons Hong Kong’s property sector will weather the Trump shock

Hong Kong’s real estate industry cannot seem to catch a break, though the outlook is not all doom and gloom if you know where to look

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Pedestrians pass a property agency in Ap Lei Chau on October 15. Hong Kong’s property sector is bracing for another four years of uncertainty after Donald Trump’s victory in the US presidential election. Photo: Eugene Lee

Nicholas Spiro

Published: 9:30am, 19 Nov 2024Updated: 11:15am, 19 Nov 2024

Spare a thought for Hong Kong’s battered real estate industry. Just when it seemed like the most important pieces of a recovery were starting to fall into place, another period of turmoil looms. Hong Kong, which has suffered a succession of shocks and crises since 2018, cannot seem to catch a break.

In September, when the United States Federal Reserve lowered interest rates for the first time in four years and Beijing announced an aggressive stimulus package, the catalysts for a recovery were coming into view. Morgan Stanley said, “Hong Kong is uniquely positioned to benefit from lower US rates and higher [Chinese] economic growth.”

Fast forward two months and the outlook is much more uncertain. President-elect Donald Trump’s victory in the US presidential election sets the stage for an onslaught of US protectionism and nationalism. This could inflict further damage on China’s economy and force the Fed to halt its monetary easing cycle.

Trump’s return to the White House, moreover, comes at a time when Hong Kong’s property market is at a crucial inflection point. The currency peg to the US dollar is finally acting as a tailwind rather than a headwind for the economy.

While it is normal for the Hong Kong Monetary Authority, the city’s de facto central bank, to move in lockstep with the Fed, the city’s banks have been quick to cut their prime lending rates. This is in stark contrast to previous easing cycles, when they waited several months before acting, Bank of America notes.

The swifter response has narrowed the gap between residential rental yields and mortgage rates, providing a fillip to investment demand. According to a report by S&P Global Ratings on November 10, yields on mass-market properties under 40 square metres (430 square feet) have surpassed mortgage rates.